Foreign Investment in Bangladesh: A Definitive Legal Guide (2025) | LegalSeba LLP

LEGAL GUIDANCE FOR GLOBAL INVESTORS

Foreign Investment Facilities in Bangladesh

Your Comprehensive Legal Guide to Tax Incentives, EPZs, and Sectoral Opportunities (Updated 2025)

Bangladesh has strategically positioned itself as a premier destination for foreign direct investment (FDI) in South Asia. Through a series of robust legislative frameworks and progressive economic policies, the government has cultivated an environment that is not only welcoming but also highly profitable for international investors. This guide provides an in-depth legal analysis of the facilities, protections, and sector-specific incentives designed to attract and retain foreign capital.

Fiscal Incentives: A Framework for Profitability

Bangladesh offers a highly competitive suite of fiscal incentives designed to maximize returns and accelerate growth. These are primarily governed by the Income Tax Act, 2023, and are regularly updated through annual Finance Acts by the National Board of Revenue (NBR).

Corporate Tax Holidays

Newly established industrial undertakings in priority sectors are eligible for generous tax holidays. The duration is location-dependent to promote balanced regional development.

  • 5-7 Years: For industries in developed and less developed regions respectively.
  • 10 Years: For specific undertakings in Economic Zones and EPZs.

Accelerated Depreciation

As an alternative to a tax holiday, capital-intensive industries can opt for accelerated depreciation, significantly reducing their tax burden in the initial years.

  • First Year: 80% depreciation on machinery.
  • Subsequent Years: 20% depreciation.

Additional Key Tax Exemptions

  • ICT & ITES Sector: A 100% corporate tax exemption is available until June 30, 2027, for income from a wide range of IT and IT-Enabled Services.
  • Royalties & Technical Fees: Income tax exemption on royalties, technical know-how, and technical assistance fees for a period of 10 years in eligible projects.
  • Capital Gains: Tax exemption on capital gains from the transfer of shares of companies listed on the stock exchange.
  • Expatriate Income: 50% income tax exemption for foreign technicians employed in eligible industries for the first 3 years of their employment.

Special Focus: Investing in Economic & EPZs

For investors focused on export markets, Bangladesh offers a highly attractive, ring-fenced environment through its Economic Zones (EZs) and Export Processing Zones (EPZs). Managed by BEPZA and BEZA, these zones are legally considered outside the customs territory, providing a uniquely streamlined framework.

Key Advantages of Investing in an EZ/EPZ

Companies operating within these zones (Type-A for 100% foreign-owned) enjoy a comprehensive package of unparalleled benefits:

  • 10-Year Graduated Tax Holiday: 100% exemption for the first 3 years, followed by a tapering rate for the next 7 years.
  • Duty-Free Import: 100% duty-free import of machinery, raw materials, and construction materials.
  • Duty-Free Vehicle Import: Exemption on customs duty for importing up to two vehicles for the project.
  • Full Repatriation: 100% repatriation of invested capital, profits, and dividends is guaranteed.
  • Domestic Market Access: Permission to sell up to 20% of finished products to the Domestic Tariff Area (DTA), subject to regulations.
  • VAT Exemption: Full exemption from Value Added Tax (VAT) on utility services related to production.
  • Offshore Banking: Access to offshore banking facilities regulated by Bangladesh Bank.
  • Sub-contracting Allowed: Freedom to sub-contract with industries in the Domestic Tariff Area (DTA).

Broader Operational & Mobility Incentives

Beyond direct taxation, Bangladesh facilitates investment by reducing operational costs and removing logistical hurdles for all investors, both inside and outside special zones.

Citizenship and Residency

To attract high-value, long-term investors, Bangladesh offers powerful incentives linked to investment volume:

  • Permanent Residency: Available for a non-repatriable investment of US$200,000.
  • Citizenship: Offered for a non-repatriable investment of US$1,000,000 or a transfer of US$2,000,000 to a recognized financial institution.

Work Permits & Visas

  • Work Permits: Issuance of work permits to foreign nationals is streamlined, with a general allowance of up to 5% of the total workforce of an industrial unit.
  • Multiple Entry Visas: New investors and their senior personnel are eligible for multiple entry visas to facilitate travel and business operations.

Sector-Specific Opportunities

The government provides highly tailored incentives to "thrust sectors" critical to its economic vision. Below is a detailed breakdown of the facilities available in these key industries.

1. Textiles & Apparel (RMG)

The backbone of Bangladesh's export economy, the RMG sector's success is built on a sophisticated ecosystem including bonded warehouse facilities, duty drawback schemes, subsidized export financing, and direct cash incentives (4-15%) for using local fabrics.

2. Pharmaceuticals & Healthcare

This sector is a global export powerhouse, with incentives focused on R&D and Active Pharmaceutical Ingredient (API) manufacturing, including 10-year tax holidays for new specialized hospitals and API parks.

3. Power & Renewable Energy

To fuel its rapid economic growth, Bangladesh offers exceptional incentives for private power generation, including a 15-year corporate tax exemption, comprehensive duty waivers on machinery, and sovereign guarantees for foreign loans.

4. Agro-processing & Food Industries

A priority sector benefiting from incentives aimed at modernization and export promotion. This includes tax holidays of 5-10 years, accelerated depreciation on machinery, and special cash incentives (e.g., 4%) against exports of specific processed goods.

Navigate Bangladesh's Investment Landscape with Confidence

The opportunities are immense, but success requires expert navigation of the legal and regulatory frameworks. At LegalSeba LLP, we provide end-to-end advisory to ensure your investment is structured for optimal growth, compliance, and profitability.

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This article is for informational purposes only and does not constitute legal advice.